Cabot (CBT) - 2024 Q3 - Quarterly Report

Part I Item 1. Financial Statements (unaudited) This section presents Cabot Corporation's unaudited consolidated financial statements for the quarter ended June 30, 2024, including key financial statements and accompanying notes Consolidated Statements of Operations Net sales increased to $1,016 million in Q3 FY2024, driving net income attributable to Cabot up 32.9% to $109 million and diluted EPS to $1.94 Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales and other operating revenues | $1,016 | $968 | $2,993 | $2,966 | | Gross profit | $256 | $223 | $720 | $614 | | Income from operations | $172 | $150 | $464 | $384 | | Net income attributable to Cabot | $109 | $82 | $243 | $211 | | Diluted earnings per share | $1.94 | $1.43 | $4.30 | $3.65 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income attributable to Cabot decreased to $44 million in Q3 FY2024, primarily due to a $66 million negative foreign currency translation adjustment, with the nine-month comprehensive income also declining to $223 million Comprehensive Income (Loss) Highlights (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $120 | $90 | $278 | $238 | | Other comprehensive income (loss) | ($66) | ($21) | ($21) | $113 | | Comprehensive income (loss) attributable to Cabot | $44 | $67 | $223 | $321 | Consolidated Balance Sheets As of June 30, 2024, total assets slightly decreased to $3,580 million, while total stockholders' equity increased to $1,496 million from $1,407 million due to retained earnings growth Balance Sheet Summary (in millions) | Metric | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total current assets | $1,591 | $1,626 | | Total assets | $3,580 | $3,604 | | Total current liabilities | $717 | $822 | | Total liabilities | $2,084 | $2,197 | | Total stockholders' equity | $1,496 | $1,407 | Consolidated Statements of Cash Flows For the nine months ended June 30, 2024, cash from operating activities increased to $488 million, while investing activities used $146 million and financing activities used $326 million, resulting in an ending cash balance of $197 million Cash Flow Summary - Nine Months Ended June 30 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $488 | $457 | | Cash used in investing activities | ($146) | ($139) | | Cash used in financing activities | ($326) | ($371) | | Effect of exchange rate changes on cash | ($57) | $67 | | Net change in cash and cash equivalents | ($41) | $14 | | Cash and cash equivalents at end of period | $197 | $220 | Notes to the Consolidated Financial Statements The notes detail accounting policies and significant financial events, including a $42 million foreign exchange loss from Argentine peso devaluation, $13 million in restructuring charges, and a planned $27 million asset purchase for Battery Materials - The company recorded a $42 million foreign exchange loss in the first nine months of fiscal 2024, primarily due to the devaluation of the Argentine peso. This included an $8 million loss from the sale of government-issued BOPREAL bonds used to settle foreign payables[15] - In fiscal 2024, the company initiated restructuring activities, including closing a reinforcing carbons unit in Tianjin, China, and idling an aerogel plant in Frankfurt, Germany. These actions resulted in charges of $13 million for the nine months ended June 30, 2024[31][32] - The reserve for respirator-related liabilities was $37 million as of June 30, 2024, a slight decrease from $38 million at September 30, 2023[22] Segment EBIT - Nine Months Ended June 30 (in millions) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Reinforcement Materials | $414 | $348 | | Performance Chemicals | $120 | $89 | | Total Segment EBIT | $534 | $437 | - On July 19, 2024, Cabot entered into agreements to purchase assets and license technology for its Battery Materials product line for $27 million, with the closing expected in the first quarter of fiscal 2025[47] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results, attributing increased income in Q3 2024 to higher earnings across both Reinforcement Materials and Performance Chemicals segments, while also detailing liquidity, capital resources, and the Q4 outlook Results of Operations—Consolidated Consolidated net sales for Q3 2024 increased by $48 million, driving gross profit up by $33 million in the quarter and $106 million for the nine-month period, despite rising operating expenses Financial Highlights (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,016 | $968 | $2,993 | $2,966 | | Gross profit | $256 | $223 | $720 | $614 | - The increase in gross profit for the nine months ended June 30, 2024, was driven by higher volumes (contributing $58 million) and higher unit margins (contributing $44 million) across both segments[52] - Selling and administrative expenses increased by $26 million for the nine months ended June 30, 2024, compared to the prior year, primarily due to higher incentive compensation expense[52] - Other expense increased by $20 million for the nine-month period, mainly due to higher foreign currency losses in Argentina following a government currency devaluation[55] Results of Operations—By Business Segment Total segment EBIT increased by $27 million in Q3 and $97 million for the nine-month period, driven by higher volumes and improved margins in Reinforcement Materials and favorable product mix in Performance Chemicals Reconciliation of Income Before Taxes to Total Segment EBIT (in millions) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Income before income taxes | $394 | $324 | | Less: Certain items | ($56) | ($7) | | Less: Other unallocated items | ($84) | ($106) | | Total segment EBIT | $534 | $437 | Reinforcement Materials Performance (in millions) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sales | $1,966 | $1,939 | | EBIT | $414 | $348 | Performance Chemicals Performance (in millions) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sales | $928 | $919 | | EBIT | $120 | $89 | - Outlook for Q4: Reinforcement Materials EBIT is expected to improve modestly from Q3. Performance Chemicals EBIT is expected to improve year-over-year but decline sequentially due to seasonality[64] Liquidity and Capital Resources The company maintains a strong liquidity position with $197 million in cash and $1.2 billion in borrowing availability, projecting fiscal 2024 capital expenditures between $220 million and $240 million - As of June 30, 2024, the company had $197 million in cash and cash equivalents and $1.2 billion available under its revolving credit agreements[65] - Capital expenditures for fiscal 2024 are expected to be between $220 million and $240 million[69] - The company expects the total capital cost to install EPA-mandated air pollution controls at its U.S. carbon black plants to be approximately $250 million, with about $195 million incurred as of June 30, 2024[70] - Financing activities in the first nine months of fiscal 2024 included $106 million in share repurchases and $69 million in dividend payments to stockholders[71] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures compared to disclosures in its fiscal year 2023 Form 10-K - Information about market risks for the period ended June 30, 2024, does not differ materially from the discussion in the 2023 10-K[73] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[74] - There were no changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[74] Part II Unregistered Sales of Equity Securities and Use of Proceeds During Q3 FY2024, Cabot repurchased 497,999 shares of common stock at an average price of approximately $100.40 per share under its share repurchase program Issuer Purchases of Equity Securities (Quarter Ended June 30, 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 0 | N/A | | May 2024 | 250,000 | $101.66 | | June 2024 | 247,999 | $99.15 | | Total | 497,999 | ~$100.40 | Other Information No directors or officers entered into, modified, or terminated Rule 10b5-1 trading plans during the third fiscal quarter of 2024 - No directors or officers entered into, modified, or terminated Rule 10b5-1 trading plans during the third fiscal quarter of 2024[77] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, officer certifications, and XBRL data files - Key exhibits filed include officer certifications (Exhibits 31.1, 31.2, 32) and Inline XBRL documents (Exhibits 101, 104)[78]